Foreclosure offer pricing

gmp3July 8, 2011

What is the strategy on offer price for a foreclosure? We are interested in one.

The bank painted and carpeted but of course there are some neglect issues like the yard and front and back decks. Do you bid 70%, 80%? We will be super strong buyers (40% down, 780 credit, etc.) and high income compared to debt. We close on our current house in mid August so we could close quickly. So they care about that stuff?

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Carol_from_ny

If you had started last year in August on the foreclosure you might have a chance of having it done by August this year. Banks are VERY slow in getting them sold.
Just finding out who actually has the paperwork on the property can take months and that's after they've taken their sweet time accepting your offer.

Been there,done it, would rather have root canal.

    Bookmark   July 8, 2011 at 11:32PM
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LoveInTheHouse

I asked about this too recently. You should go back a little and look for my post. Some people said the same thing Carol said but others said it could take a few days to get an answer depending on the bank and the area. I didn't ask about what to offer.

I'm wondering if a bank who is selling a foreclosed home will only take offers from people who have no house-selling contingency? Will they take an offer from someone whose house is under contract? Do you actually have to be closed on your house before you can buy a foreclosure?

    Bookmark   July 8, 2011 at 11:52PM
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gmp3

Realtor said we would know if offer was accepted within a few says, short sales are a completely different atory and can drag forever. Good point about contingency, I'll need to ask about that.

    Bookmark   July 9, 2011 at 12:00AM
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gmp3

I forgot to clairify this house is bank owned, so the foreclosure is over. I think I got my terms wrong. It is listed with a broker.

    Bookmark   July 9, 2011 at 12:05AM
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terriks

If you had started last year in August on the foreclosure you might have a chance of having it done by August this year. Banks are VERY slow in getting them sold.

This is incorrect. Maybe this would be the case with a short sale, but definitely not with a bank owned property. I know people who have purchased foreclosures and have received answers very quickly and closed in about the same time as a normal sale. Even the short sales are going faster than in the past.
I work in a RE office and the foreclosures are not taking any longer than "regular" sales on average.

    Bookmark   July 9, 2011 at 1:49AM
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ncrealestateguy

Correct... short sales are a gamble, but REOs take about the same amount of time as a regular sale. Banks will not accept a contingency as far as I understand.
As far as making an offer, there is no magic formula that you can use to know what they will accept. If the home is priced right, you will pay close to full price; if it is priced high and has been on the market for a long time, your chances are better at getting it at a reduced price.

    Bookmark   July 9, 2011 at 8:21AM
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brickeyee

"REOs take about the same amount of time as a regular sale..."

Not for the ones I have purchased (a total of four, with two last fall.

Banks HATE losing money, and will try and put off the event and diffuse the responsibility within the bank, dragging things out (the 'committee' makes the decisions so no single person has to sign off on the loss).

If they are NOT losing money they can move faster, but rarely as quickly as a wiling seller and wiling buyer seem to get things done.

    Bookmark   July 9, 2011 at 10:18AM
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barbcollins

We closed on ours Dec 2009 in 2 weeks.

Listing price was $69K (after dropping from $120K) and we offered and they accepted 60K.

Next time I will be more aggresive in making a lower offer. I found out after our contract was accepted that they were already planning on dropping to $58K. I think they would have taken 50K from us.

    Bookmark   July 9, 2011 at 12:45PM
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gmp3

Thanks everyone. This one says in the listing "Close By 10/31/2011 & Request Up To 3.5% In Final Sales Price For Closing Cost Assistance. Homepath."

I looked it up and found the link below. Is this only for people using Homepath financing ? I looks like it is for anyone to get a deal done quickly.

Here is a link that might be useful: incentives

    Bookmark   July 9, 2011 at 3:05PM
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terriks

If the home is priced right, you will pay close to full price; if it is priced high and has been on the market for a long time, your chances are better at getting it at a reduced price.

And if the home is underpriced, expect a bidding war. That's what is happening in my area, especially for homes under about $150k.

    Bookmark   July 9, 2011 at 5:04PM
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jane__ny

I wondered about 'Homepath' also. See it on some listings.

Jane

    Bookmark   July 9, 2011 at 8:51PM
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barbcollins

Homepath means it is a Fannie Mae Foreclosure and buyers can get special financing.

    Bookmark   July 9, 2011 at 9:33PM
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brickeyee

"Next time I will be more aggresive in making a lower offer. I found out after our contract was accepted that they were already planning on dropping to $58K. I think they would have taken 50K from us. "

It can be anything from difficult to imposable to determine how deep the bank is into the property.

A review of recorded notes to find out the terms of the old not that was foreclosed, and how old it was can provide some information.
What you often cannot determine is how long ago the owner actually defaulted (2 months, 6 months, 12 months?), and how long the lender spent dithering around and the costs they inured (the folks they hire to pursue the foreclosure process do not work for free).

If there was PMI on the loan, the bank may not be looking at as much of a loss (if the PMI vendor can be forced to pay).

    Bookmark   July 10, 2011 at 10:42AM
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writersblock

In our area, homepath houses often go for very much less than the list price. I've been kicking myself for just missing one that was listed at 79K and sold for 35K.

They evidently are more concerned about moving inventory than banks are.

I have a related question, if I may tag on to this. When looking up the tax records for foreclosures, what does the last sale price mean? I mean when the bank completed the foreclosure and listed the house.

    Bookmark   July 10, 2011 at 11:35PM
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writersblock

Forgot to mention that homepath allows you to include a certain amount for repairs in your financing if you're going to be the owner occupant and they consider the property needs work, as well as sometimes covering a certain amount of the closing costs for certain buyers.

    Bookmark   July 10, 2011 at 11:43PM
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gmp3

Thanks writersblock, I guess we can make a low offer and are just dealing with a bank so they can go ahead and counter without hurt feelings. What is working against us is that it has only been on the market 30 days. It is listed at 325K, and a property in the same neighborhood that was 300' bigger, had an extra bedroom and a study, with nicer upgrades, new windows, professionally finished and 300' larger basement and a 10K carpet allowance sold for 310K. Any suggestions for the first offer?

    Bookmark   July 11, 2011 at 12:42AM
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writersblock

It's hard to say. Have you tracked any other foreclosures in the area to get an idea of the spread between asking and getting? Also, how low you can start depends to some extent on how active the market is in your area. For a while around here you had to bid pretty high (often even above asking price) because there was some fierce competition from big investment groups that didn't bother much about realistic property values (must have had a program set up to bid on every property in the area below $xxx, but that's okay, because I foresee another big wave of stuff hitting the market when they either fold or realize what they've gotten into).

Also to clarify in my first post what I'm asking about the price listed for last sale on a foreclosure, here's an example of what puzzles me: The owner is listed as the bank, with a purchase price of, say, $44k. The house is listed at $59K, and given the date of previous sale, I would say the foreclosed owners probably paid about $200K in 2007. So where does the $44K come from? If they couldn't make the payments or did jingle mail, they must have owed more than that, so it can't be the amount of the debt. What would it be?

    Bookmark   July 11, 2011 at 12:27PM
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gmp3

The property I am interested in is listed at $155 per foot (above grade) the non REO I mentioned above sold for $124 per foot plus had another finished 1200' in the basement. I live in a neighborhood now with larger homes of the same vintage but just one subdivision away. One on my street was sold to a flipper for 345K and was listed at $394K. That was on the market 6 month though.

    Bookmark   July 11, 2011 at 1:37PM
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gmp3

The property on my street started at 415K

    Bookmark   July 11, 2011 at 2:00PM
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writersblock

Well, given what you mention, it sounds like you would probably want to be proportionately higher than someone bidding around here. The fact that the whole concept of "flip" still exists in your area means it must be much less affected by the housing crash than my area has been, and it sounds like there isn't much available in your neighborhood.

Outside of ultra high end real estate (10 million+) the only buying in my area is bottom feeding, and that motivated not always by greed but by the realization that there's no reason to except prices to stop sliding any time soon, so it's a totally different world than yours, by the sound of things.

So the next thing to consider is how badly you want the house. Are you willing to make a low opening bid and possibly risk losing it to someone else?

    Bookmark   July 11, 2011 at 2:26PM
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gmp3

Well the owner occupant period is over so I don't think they will have a bidding war. I want the house but it needs a lot of work so I only want it if it is a deal. I will ask the realtor today what happens if we make a low ball and they reject, and/or if you can present grounding for your offer, i.e., needs new roof, windows, patio, no finished basement compared to comp which sold $21/foot less than subject.

    Bookmark   July 11, 2011 at 3:16PM
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ncrealestateguy

Did you find out if they will take a contingent offer? I would be surprised if so.
You could submit comps along with your offer, however, I have found that when a foreclosure is overpriced, about the only thing that makes the light bulb go off with a bank is time on the market.

    Bookmark   July 11, 2011 at 8:38PM
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jane__ny

I just went through this business in Fla. This is how it was explained to me.

Home owners default and bank puts the house up for auction. The bank doesn't have to accept any of the bids. If the bank doesn't accept the bids, or there were no bids, the bank buys the house back. That is the price you see.

Its all paper nonsense, but the last price is what the bank puts down as their buy price.

We looked at a house going up for auction and noticed the banks did not accept approximately 60% of the bids and bought the house back. We had considered bidding on a house which was going up for auction.

Maybe some Realtors can chime in an clarify.

Jane

    Bookmark   July 13, 2011 at 11:42PM
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writersblock

Thanks, Jane. Yes, the auction is a standard part of foreclosure proceedings in FL, but I was under the impression that the lien holder usually made only a token payment, like a dollar or so.

    Bookmark   July 14, 2011 at 12:15PM
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gmp3

Well the offer is in, we went lower than what we are willing to pay hoping the bank will reveal their bottom. No contingency. On paper we can do it without our house closing, it wouldn't be pretty, we'd be bringing the last jar of pennies to closing ;-) but we could qualify, eat no, qualify yes. The realtor was not overly worried about us having this offer accepted and closing before our house closes.

    Bookmark   July 14, 2011 at 11:25PM
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writersblock

Good luck, gmp3! I hope it all works out for you.

    Bookmark   July 14, 2011 at 11:37PM
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brickeyee

"I was under the impression that the lien holder usually made only a token payment, like a dollar or so."

No, the lien holder normally bids up to the value of the lien (plus incurred expenses) to ensure they get the property and preserve their ownership.

I do not know about Florida, but the standard Fannie/Freddie note defines the terms of the foreclosure and auction process.

The note holder bids like everyone else (since they are bidding on their own note it is not like money actually changes hands though).

Second mortgage holders bid also, since if they do not win the house their note is erased.

    Bookmark   July 15, 2011 at 10:37AM
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writersblock

Thanks, brickeyee. There was an interesting situation in our area recently where the bank didn't appear for the auction (they claimed afterwards they weren't properly notified of the date) and a third party bidder managed to get the property at a very good price (maybe 50K-ish for a house expected to sell for about 150K after it listed again). The bank wants the house back and the buyer claims he bought it legitimately. AFAIK there's been no final outcome yet on that one.

    Bookmark   July 15, 2011 at 11:36AM
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brickeyee

Since the auctioneer is normally an agent of the bank (or a subsidiary agent of the bank through a subcontractor) the may find themselves in a bad way depending on how hard the purchaser is wiling to fight.

It the trustee on the note issued the required foreclosure advertising (I am sure you have seen them in the paper) the auction mat very well have been correct and valid.

    Bookmark   July 15, 2011 at 1:25PM
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